Hollow shells: The alleged link between individual contracting and productivity growth.

Abstract

Many of the claims about the benefits of individual contracts ride on the proposition that individual contracts deliver higher productivity (BCA 2005:12; ACCI 2004:1; Langoulant 2004; Andrews 2004b; OEA 2004a; Gollan & Hamberger 2003; Howard & Andrews 2005:3). When productivity is higher, the corporation can afford to pay more and is more than willing to do so. Individual contracts, therefore, are a 'win win' for both corporation and employee. It is on this basis that public policy changes since 1996 have sought to discourage union-related collective bargaining and promote individual contracting. This paper seeks to assess the claims of corporate lobbyists and the Federal government that individual contracting raises productivity. It compares the effects on productivity of individual contracting and union-related collective bargaining. It also refers to comparison between the effects of individual contracting and of awards on productivity growth. It starts by looking at national level evidence in New Zealand (where a system of individual contracts was abruptly introduced in 1991) and Australia (where individual contracts have been encouraged in the federal jurisdiction since 1997), then turns to closely examine the basis of the evidence put forward by the Business Council of Australia (BCA) and, more recently, the federal government. It also considers the argument that encouragement of individual contracting will help solve the current skills shortage, and the relationship between contracting and profitability.